LONDON
Inflation in the UK soared to a 40-year high of 9 percent in April as food and energy prices spiralled, official figures revealed Wednesday, escalating the country’s cost-of-living crisis.
The 9pc rise in the consumer price index is the highest since records began in their current form in 1989, outstripping the 8.4pc annual rise posted in March 1992 and well ahead of the 7% seen in March of this year. The UK’s Office for National Statistics also said its estimates suggest that inflation would have last been higher “sometime around 1982.”
From April 1, the UK energy regulator increased the household energy price cap by 54% following a surge in wholesale energy prices, including a record rise in global gas prices. The regulator, Ofgem, has not ruled out further increases to the cap at its periodic reviews this year.
The Bank of England has hiked interest rates at four consecutive meetings, raising the cost of borrowing from its historic pandemic-era low of 0.1% to a 13-year high of 1%, as it looks to rein in runaway inflation without stomping out economic growth.
A recent survey showed that a quarter of Britons have resorted to skipping meals as inflationary pressures and a food crisis conflate what Bank of England Governor Andrew Bailey has dubbed an “apocalyptic” outlook for consumers.
Wednesday’s mammoth inflation print delivers another “hammer blow” to households already worried about the cost of living, and there are warnings that the worst is yet to come.
“For the first time since records began, there are fewer people unemployed than there are job vacancies and the unemployment rate now sits at a nearly 50-year low, and workers are capitalizing on their increased bargaining power to ask employers to raise pay to cope with higher living costs, with wage growth now running at 7%,” noted Ambrose Crofton, global market strategist at JPMorgan Asset Management.
“The risk is that should [the Bank of England] raise interest rates too quickly at a time when consumers are already feeling the pinch, then this could crimp demand and push the economy into recession. Doing too little, however, risks entrenching inflation expectations and driving a more persistent wage-price feedback loop.”
The British Chambers of Commerce warned following Wednesday’s announcement that the “eye-watering” inflation rate and cost-of-living crisis facing households is damaging firms’ ability to invest and operate at full capacity.
“The scale at which inflation is damaging key drivers of U.K. output, including consumer spending and business investment, is unprecedented and means there is a real chance the U.K. will be in recession by the third quarter of the year,” said Suren Thiru, head of economics at the BCC, in a note.
